Self-disruption gains force at retail

BY David Orgel

Industries have lined up like bowling pins. Taxis. Media. Entertainment. Hotels.

Being disrupted is such a common occurrence in today’s business world that for any particular industry, it’s not a question of if, but when. That’s a fact retailers know well, having been on the receiving end of disruption.

Increasingly for some, there’s more talk about responding with efforts to disrupt themselves. These companies are reexamining their own businesses before they are blindsided by outsiders.

Self-disruption isn’t a brand new concept — Apple and Amazon often have been cited for their ongoing self-disruption efforts to drive innovation. There are consultants who instruct leaders in how to reimagine their industries and organizations. Self-disruption has a masochistic sound to it, but it’s more about absorbing some pain today to head off potential demise tomorrow.

Speakers discussed the importance of self-disruption in late November at the annual DSN Industry Issues Summit in New York, where executives cited examples in health care, retail and other segments, and expressed the urgency to move quickly.

There is a common refrain from emerging technology companies that would disrupt an industry such as health care, said panel moderator Chris Dimos, who is president of retail solutions at McKesson. “I am the Uber for health care, I am the Lyft for health care. I’m going to revolutionize health care.” These challenges need to be taken seriously, and more retailers are aiming to act earlier rather than later.

Ryan Rumbarger, vice president of pharmacy operations at CVS Health, said the challenges go beyond just health care to impact a range of new consumer demands from retail. “Consumers are demanding more convenience, so we think about how do we disrupt ourselves before we get disrupted,” he said. “When we decided to go nationwide with delivery, it was because we said, ‘We’ve got to get ahead of things, and meet our patients when and where they need and want us.’”

The challenges inherent in self-disruption can be daunting. The fact is, emerging companies aiming to disrupt don’t have all the constraints of more established entities, including the extensive infrastructures. That’s a big advantage that makes newer players nimbler. So how can established, traditional companies effectively disrupt themselves? A single formula doesn’t exist, but there were some compelling ideas cited by panelists. One is the need to commit to massive change that may be painful in the short-term, but hopefully beneficial down the road.

Another strategy is to borrow from successful retailer efforts elsewhere in the United States and in other countries. Some traditional retailers are moving beyond their comfort zones in this way, finding innovative examples to emulate. It’s even better if those examples already exist in-house. Walgreens’ Rina Shah, vice president of pharmacy operations and specialty, said her company can benefit by leveraging some best practices from United Kingdom-based sister company Boots that continues to innovate in wellness and beauty. It’s also essential for retailers to think more like the start-ups they aim to head off. What do these start-ups do really well? “They are absolutely obsessed with the customer and what that customer experience needs to look like,” said Clay Courville, vice president and general manager at McKesson Pharmacy Technology and Services.

Finally, it’s not enough to aim for self-disruption; you have to execute on it well. This requires a regular recommitment to the mission, doing whatever it takes to move it ahead. You can’t do this without having people on board who embrace a disruptive mind-set.

Once a retailer is well on the path to self-disruption, there’s an opportunity to reintroduce its organization to customers in compelling ways, with new kinds of stories. That’s the point at which you know pain is turning into gain.

David Orgel is an award-winning business journalist, industry expert and speaker. He currently is the principal of David Orgel Consulting, delivering strategic content and counsel to the food, retail and CPG industries. To read last month’s column, click here.


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